IMF said it is “concerned” that a proposed bill to strip the Georgian National Bank (NBG) of supervisory functions of banking sector would put central bank’s “independence at risk.”

“We recommend that proper consultations with key stakeholders and international experts take place now. If these consultations result in proposals to amend the central bank law, any amendments should preserve the independence of the NBG and ensure that its governance and operations are in line with international best practice. The IMF stands ready to provide assistance in this area,” Azim Sadikov, IMF Resident Representative, said in a written statement on June 5.

The bill, co-sponsored by Georgian Dream lawmaker Tamaz Mechiauri, who chairs parliamentary committee for finance and budgetary issues, has been criticized by business associations and President Giorgi Margvelashvili, who indicated recently that he would veto the bill if it is approved by the Parliament. Government representatives and sponsors of the bill held consultations with stakeholders on June 4 and another meeting is also planned for June 5 to discuss the proposal, which has yet to be deliberated by the Parliament.
 
Ex-PM Bidzina Ivanishvili dismissed on June 4 criticism of the proposal and said its adoption would help to increase “independence of banks”.

In a written statement the IMF Resident Representative also responded to Ivanishvili’s comments about asking prosecutor’s office to drop investigation against central bank chief Giorgi Kadagidze over his alleged role in a plot against Cartu Bank, owned by Ivanishvili, upon a request of IMF representative.

“The International Monetary Fund has not taken, and cannot take a view on the issues related to justice and individuals’ relation with the law. This is not our mandate,” Sadikov said in his statement on June 5.

“In its dialogue with the Georgian authorities, the IMF has consistently emphasized the importance of respecting and preserving NBG independence. Violating NBG independence would weaken the institution, undermine the credibility of its monetary and financial sector policies, and threaten investor confidence,” Sadikov said.

“The authorities have reaffirmed repeatedly their commitment to NBG independence. This has allowed the Fund to support Georgia with economic assistance programs, and most recently through the [USD 154 million] Stand-By Arrangement launched in July 2014,” he said.

According to the controversial bill proposal Financial Supervisory Agency should be established this summer, which will be in charge of monitoring and supervising the banking sector and other financial institutions. These supervisory functions are currently carried out by departments within the Central Bank.

Speaking about the reasons of the initiative, co-sponsor of the bill, MP Mechiauri, said on May 22 that current board members of the central bank “do not reflect at all interests of those forces, which are currently in power.” He also argued that because of that the government has no information about developments in the banking sector.

According to the bill, the Financial Supervisory Agency will have a seven-member board. The Central Bank’s governor will be an ex-officio member of the board, but will have no right to serve as a chairperson of the board simultaneously. The remaining six members of the board will be elected by Parliament. The chairperson of the board will have the right to appoint the head of the agency.